British Airways owner IAG (IAG.L) lost as much as 8% on Friday after it revealed a hefty loss in the first quarter of the year thanks to Omicron denting passenger numbers.
The airline, which also owns Aer Lingus and Iberia, posted a pre-tax loss of £916m ($1.13bn) in the first three months, although this had narrowed from £1.2bn the year before.
The overall proportion of seats filled on flights was higher than a year ago at the height of COVID lockdowns, with the firm flying 65.1% of its pre-pandemic capacity, compared to 19.6% in 2021.
It now expects capacity to hit 80% of 2019 levels in the second quarter of the year, rising to 85% in the three months after that.
Capacity on routes across the North Atlantic will also be "close to fully restored" between July and September.
Meanwhile, business travel also improved during the period, which has helped lift forward bookings. There was “no noticeable impact” from the war in Ukraine on bookings, it said.
Luis Gallego, chief executive of the group, said demand was “recovering strongly” and in line with expectations. He expects to return to profitability in the second quarter and over 2022 as a whole.
It comes as British Airways was forced to cancel thousands of flights in recent weeks as it battles with ongoing staff shortages and sickness. The rate of staff absences at BA in previous months has been around 7%, compared with 4-5% normally.
After an unprecedented period of difficulty during the pandemic, the firm also faces the headwind of rising fuel prices, which it may start passing on to customers.
The trading update on Friday sent the stock to the bottom of the FTSE (^FTSE) on the day. The stock is trading modestly lower year-to-date after shedding more than 30% from the February peak to the March trough.
“There is no getting away from the damage inflicted on IAG. Losses are a stark reminder of the long road ahead. A moderation of expansion plans in light of staff shortages, following the issues caused by cancellations more recently, won’t be very well received,” Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said.
“At the moment, IAG is in the sticky point of trying to massively ramp up capacity, but planes aren’t quite full enough, or frequent enough, which means the costs associated with getting things going again are stifling profits.”
She added that the current cost of living crisis could also take its toll on the company, which is less focussed on short-haul flights compared to some of its rivals.
“There’s an argument to say that now the world is largely re-opening, customers could be inclined to splurge on a long-haul trip having been stuck at home for years. The other side of that story though is of course the cost-of-living crisis.
“Those that often travel first class are likely not going to see much of a change in spending habits, but the situation may well act as a drag on BA’s shorter duration routes.”
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